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Price Competition and Market COncentration: An Experimental Study

Author

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  • Dufwenberg, M.
  • Gneezy, U.

Abstract

The classical price competition model (named after Bertrand) prescribes that in equilibrium prices are equal to marginal costs. Moreover, prices do not depend on the number of competitors. Since this outcome is not in line with real-life observations, it is known as the "Bertrand Paradox". Many theoretical problems with the original model have been considered as an explanation of the paradox in the literature.

Suggested Citation

  • Dufwenberg, M. & Gneezy, U., 1998. "Price Competition and Market COncentration: An Experimental Study," Papers 1998-08, Uppsala - Working Paper Series.
  • Handle: RePEc:fth:uppaal:1998-08
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    References listed on IDEAS

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    1. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
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    7. Dufwenberg, Martin & Gneezy, Uri, 2000. "Price competition and market concentration: an experimental study," International Journal of Industrial Organization, Elsevier, vol. 18(1), pages 7-22, January.
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    More about this item

    Keywords

    PRICES ; COMPETITION ; MARKETS;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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